Is Facebook Intentionally Throttling Organic Reach?

Companies have been watching their organic reach on Facebook Inc (NASDAQ:FB) fall for months, but now we have the first indications from someone inside Facebook that this is part of the plan, and that the drop in free publicity is far from over. An anonymous source told Sam Biddle at Gawker that Facebook intends to cut organic reach down to just 1% – 2% for companies.

That means for a major brand with a million likes, a new post will get about 100,000 posts worth of organic reach. A smaller company with 1000 likes might show up in just ten people’s news feed. This doesn’t affect individuals sharing posts with their friends, but it cuts back on the idea that Facebook Inc (NASDAQ:FB) is a great, low-cost promotional tool for small businesses. Apparently Facebook has started slowly rolling out the news to major brands instead of letting the world know in one public announcement so that it isn’t such a shock to the system.

Facebook needs to improve engagement as it charges for reach

For a company that needs to increase ad revenues to satisfy shareholders, cutting back on the free reach makes sense, but any company taking a hard look at what Facebook Inc (NASDAQ:FB) offers might not like what they find. Like-farming is a growing problem that dilutes Facebook reach (both free and paid for) and makes advertising less valuable. It’s hard to complain about dilution when your publicity is free, but as the price goes up Facebook will need to crack down on the farmers. The danger is that some companies will find that paying for reach (the number of times an ad shows up in someone’s news feed) isn’t justified by the level of engagement they are getting (actual interaction with those ads).

Facebook news plays a similar role to Google’s search results

There could also be backlash against the company using newsfeeds to promote its own services, such as WhatsApp, at the expense of other messaging apps. Of course Facebook is a for-profit business, and in that sense should be able to do what it pleases, but try to tell that to Google Inc (NASDAQ:GOOG) which has been in anti-trust proceedings for years over its dominance of the search market. Like the first page of Google search results, the Facebook news feed is a major portal of information, and Facebook may want to be careful about how hard it leverages that advantage before other companies start to cry foul.